Future of streaming music must include fairness for songwriters

Today, anyone can access music almost anywhere. Due to the revolution in digital services over the last decade, business models are trending towards streaming platforms and away from individual purchases.

This rapidly changing reality has set off a debate about the future of streaming music sales and companies like Pandora – whose value keeps rising while they refuse to pay songwriters what they are owed – claim that antiquated laws are preferable to a free market where creators are paid fairly.

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The demand for streaming radio is obvious, and songwriters want as much access as possible to their creations, however digital providers are working against the very people who make their businesses succeed.

To be clear: songwriters are not asking for a hand out, they only want a fair marketplace in which to sell their intellectual property. Companies like Pandora clearly resist this for one reason: their business thrives on the backs of songwriters, while many songwriters are barely getting by.

How this is happening is simple. Digital streaming companies take advantage of the fact that the songwriting and music licensing world exists in the Stone Age, not the Digital Age.

Current laws and regulations that govern the royalties paid to the very people who give life to the industry were created in 1909 and 1941 – long before the dawn of digital music.

The compulsory licenses and consent decrees that were put into place decades ago were meant to curb potential abuses on the part of the content-holders, however they were not meant to shortchange permanently the very people who write the music that millions of people enjoy. This is one reason the Department of Justice is currently reviewing the consent decrees governing music licenses.

There are several myths that are being perpetuated by those who would have you believe that songwriters don’t deserve fair compensation for their contributions.

Columnists who are quick to discount the intellectual property rights of songwriters have written on this website that continuing to impose burdens and excessive government regulations on the rights of songwriters is necessary for streaming businesses to survive. However, the irony is that these antiquated regulations and laws perpetuate the very problems digital music providers like Pandora claim get in the way of a free market – something they claim to want.

The government-enforced consent decrees that rule the licensing of public performance rights restrict the ability of performance rights organizations and music publishers to bundle the multiple, global rights that new digital music services now require to operate and compete on a world-wide scale.

Additionally, the court proceedings that set compulsory license rates for mechanical rights occur once every five years, far slower than the development of new technology for digital music distribution. Both of these facts put songwriters at a distinct disadvantage when it comes to keeping up in a competitive marketplace for their music.

The very regulations that digital streaming companies seek to maintain produce what those same companies argue is a slow and unfair market for the licensing of songs.

Perhaps the greatest red herring raised by digital services is the perceived lack of transparency with respect to copyright ownership and licensing of performance rights – as if agreements are purposely made in the dark of night.

Music publishers and songwriters are, and have always been, willing to disclose ownership and catalogue information in their free market licensing transactions. Just look to the areas where songwriters and publishers are allowed to negotiate, like synchronization licenses. In these agreements, providing ownership and catalogue information as part of a license happens naturally.

It is in the other sectors where songwriters are beholden to the consent decrees which offer a below-market blanket license, that have led to this perception of non-transparency where publishers are constrained from licensing their rights outside the three major performance rights organizations (PROs). This system was set up by the government long ago to curb potential abuses – and yet sites like Pandora claim they are what give PRO’s monopolistic power.

Just look at the numbers to see how much government intrusion has hampered songwriters. Currently the U.S. songwriting industry is worth roughly $2.2 billion, however over $2.3 billion is lost due to unjust government regulations. You read that right. More than half of our industry’s value is lost due to government overreach.

The elimination or modification of the government-mandated compulsory license and consent decrees in favor of a licensing structure that more closely resembles free market negotiations will result in a more competitive, transparent marketplace for music rights, benefiting not only music publishers and songwriters, but music services, consumers and the music market generally. No one who values either art or the importance of a free and fair market can logically object.

Songwriting – the very industry that makes online streaming possible – is in jeopardy because of those who unfairly profit from it. Ironically, the same people who argue that the current system is unfair and runs counter to a free market, also want to keep outdated consent decrees and compulsory licenses in place.

Thankfully, the Songwriter Equity Act has been introduced in Congress to help lessen the injustices when it comes to songwriters’ compensation, and this legislation will reduce roadblocks and expand incentives for even more music creation.

David Israelite is the President and CEO of the National Music Publishers' Association (NMPA). Founded in 1917, NMPA is the trade association representing American music publishers and their songwriting partners.